The Medicaid programs in New Jersey which help residents pay long-term care costs are about to get a major overhaul. Currently, there are three (3) Medicaid programs in New Jersey that pay for long-term care costs. The Medicaid-Only Medicaid program pays the costs of caring for nursing home residents. A companion program, Global Options for Long-Term Care, pays long-term care costs for residents of assistant living facilities and for home health aides who assist home-bound residents.

Both the Medicaid-Only Medicaid program and the Global Options program have an “income cap,” or upper limit on the amount of monthly income which program participants may receive from any source. Currently, the income cap is $2,163 per month. If a program recipient receives monthly income in excess of the income cap, he or she is ineligible for Medicaid.

However, nursing homes residents who receive monthly income which exceeds the income cap may still qualify for Medicaid under the third Medicaid program available in New Jersey, called the Medically-Needy Medicaid program. Medically-Needy Medicaid pays long-term care costs for nursing home residents with monthly income in excess of the income cap. Importantly, however, the Medically-Needy program will pay for long-term care ONLY for nursing homes residents with excess income, NOT for New Jersey residents with excess income who reside in assisted living facilities or at home. New Jersey residents who need long-term care in an assistant living facility or at home but who receive monthly income in excess of the income cap can never be eligible for Medicaid at present. As a result, needy residents with excess income are forced into nursing homes.

This is about to change. In October 2012, the State of New Jersey received approval from the federal government to eliminate the income cap from its home-and-community based Medicaid programs. Until now, the State has not implemented the change, but State officials have recently announced that the income cap will be eliminated soon.

Once the income cap is eliminated, New Jersey residents in assisted living facilities and those who reside at home and need long-term care but receive monthly income in excess of the income cap will be eligible to receive Medicaid benefits notwithstanding the excess income. However, the monthly income in excess of the income cap must be transferred to a Qualified Income Trust, also called a “Miller” trust after an important federal court case called Miller v. Ybarra, 746 F. Supp. 19 (D.Colo. 1990). Excess income placed in a Miller trust does not count against an individual applying for Medicaid benefits.

Once eligible for benefits, the Medicaid beneficiary is required to “spend down” the excess income in the trust each month. Generally speaking, the program recipient will “spend down” excess income as follows: he or she will be allowed to retain $35 per month of the excess income. If married, he or she also may be entitled to divert some of the excess income in the trust to the community spouse, depending on the amount of the spouse’s income. Most of the excess income will be paid toward the costs of care. In the event that funds remain in the trust after the program recipient dies, Medicaid is entitled to reimbursement.

Although qualifying for Medicaid may become more complicated after the income cap is eliminated and trust funds are established, the number of New Jersey residents who can receive assistance through Medicaid will increase. Residents who can reside at home or in the community will not be forced into a nursing home due to excess income. This is a positive development for the elderly and disabled in New Jersey who need long-term care.

For additional information concerning Medicaid and public benefits planning, visit: